Following General Musharraf's decision to cooperate with the US-led coalition against the Taliban regime and supporters of Osama bin Laden in Afghanistan, the United States lifted bilateral sanctions against Pakistan. Islamabad's withdrawal of support for the Taliban regime cleared the way for a favourable rescheduling of the country's external debt and provided aid packages to assist with poverty alleviation and refugees. The International Monetary Fund (IMF) has approved a US $1.3 billion loan for Pakistan to help fight poverty and offset the economic impact of the war in Afghanistan.

After discussions between President Bush and Musharraf in February 2002, the White House announced its intention to work with Congress to increase assistance to Pakistan, particularly in areas related to debt relief, increased trade, education reform and defence and security cooperation. Bush has agreed to offer Pakistan up to US $1 billion in debt relief before the end of 2003. Pakistan currently spends an estimated 80 percent of its annual budget on debt servicing. Islamabad has the eighth largest army in the world - a major drain on the national fiscus. The government justifies high spending on the military by the need to counter Indian beligerence in disputed Kashmir.

Pakistan's population of 145 million is increasing by 3-4 million people per year - one of the fastest growth rates in the world. This rapid growth is placing unprecedented pressure on the country's social fabric and meagre natural resources. In addition, the country hosts at least two million Afghan refugees. The refugee population has severely strained Pakistan's resources, including its healthcare system. Although political changes in neighbouring Afghanistan mean many refugees will return, UNHCR's prediction of mass migration in 2002 looks unlikely until security and food availability improve throughout the country. The ongoing dispute with India over Kashmir has also created a sizeable refugee population.

Largely dependent on its agricultural output, Pakistan has suffered the twin effects of a four-year drought and the lack of an effective national water management strategy. Up to 350,000 people in the southwestern province of Baluchistan remain dependant on international food aid, while an estimated four million people in the southern port city of Karachi do not have access to potable water. More than 70 percent of the population are illiterate due to a lack of educational services. Ethnic and sectarian tensions remain in major cities, much of it fuelled by religious-based political parties. Child labour is common throughout Pakistan, particularly in the growing informal sector.

Fears of rising drug consumption have grown in recent months because an upsurge of supplies from Afghanistan have led to lower prices. Despite Afghan government attempts to destroy the spring crop, opium and heroin will be continue to be cheaply available in Pakistani in 2002. HIV/AIDS infection rates remain low in Pakistan, particularly in comparison to India, Bangladesh and Nepal, but the disease will find its way into the general population through the traditional transmission routes unless the government launches a concerted education and testing campaign to fight it.

Environmental concerns include deforestation, soil erosion and desertification. North ans western parts of the country are susceptible to earthquakes, the latest in March 2002 caused considerable damage in northwestern parts of the country. The river Indus floods along its lower reaches during the monsoon.

Islamist groups opposed to Pakistan's support for US action in Afghanistan are becoming increasingly belligerent towards the government and may prove to be a threat in the future. Western confidence in Pakistan's ability to combat the terrorist threat was shaken in March after a grenade attack on an Islamabad church frequented by foreigners. Musharraf intends to remain in power until 2007 and a referendum to legitimise this is to be held in late April. However, his lack of a significant political support base may lead to tension between the president and parliament, due to be elected in October 2002.

Created during the partition of the Indian sub-continent in 1947, Pakistan has retained a long history of military rule. In 1977, Pakistan's elected prime minister, Zulfikar Ali Bhutto, was overthrown by General Zia ul Haq who enforced martial law and ruled until 1988. History was repeated when General Musharraf overthrew prime minister Nawaz Sharif in a bloodless coup on charges of corruption. General Musharraf dissolved parliament and declared himself president in June 2001.

Links to other sources

US Committee for Refugees

US State Department Background Notes

Pakistan News Service